FAR 3-7: Intercompany Transactions Flashcards
Name several pro forma workpaper elimination entries when producing consolidated financial statements
Eliminate:
- The effects of intercompany dividends
- Parent’s investment in sub account
- The entire stockholder’s equity section of the sub
- The effects of the gain or loss & adjust for the excess depreciation on the sale of PPE between affiliates
- All intercompany sales & purchases
- All other intercompany balance sheet & income statement accounts
- Intercompany profit in COGS, & in beginning & ending inventories relating to an intercompany sale of merchandise between affiliates
Adjust:
- Recognize NCI
- Adjust the balance sheet of the sub to fair value
- Establish goodwill
State the workpaper elimination entry for intercompany inventory transactions
Dr. Retained earnings (intercompany profit in beginning inventory)
Dr. Intercompany sales
Cr. Intercompany COGS
Cr. COGS (intercompany profit in goods sold)
Cr. Ending inventory (intercompany profit in ending inventory)
State the workpaper elimination entry for intercompany bond transactions
Dr. Bonds payable
Dr. Premium (or credit discount)
Cr. Investment in affiliates bonds
Cr. Gain on extinguishment of bonds (or debit loss on extinguishment of bonds)
State the workpaper elimination entry for intercompany land transactions
Dr. Intercompany gain on sale of land
Cr. Land
State the workpaper elimination entries for intercompany depreciable assets transactions
*Elimination Entry 1—Eliminate intercompany gain & adjust assets & accumulated depreciation to original amounts:
Dr. Intercompany gain on sale of machinery
Cr. Machinery
Cr. Accumulated depreciation
*Elimination Entry 2—Eliminate excess depreciation:
Dr. Accumulated depreciation
Cr. Depreciation expenses